The Tax-Free Factory (TFF) scheme of 1987 included incentives of a 13-year tax holiday, duty exemptions on capital goods and raw materials, and freedom to repatriate capital and profits (FTIB 1999: 85). Under the Tax-Free Factory/Tax-Free Zone (TFF/TFZ) scheme, companies exporting more than 70 per cent of their annual production were granted a corporate tax holiday for 13 years. Initially this was 95 per cent but was reduced. It also included a total waiver of licensing for import of capital goods and other production materials and exemption from customs duty on imported capital goods. In addition, there was no withholding of tax on interest, dividends and/or royalty payments paid abroad if they were not subjected to tax in the shareholders’ country.

Furthermore, final dividends were taxed at a rate of 15 per cent when paid to resident shareholders compared with the then normal rate of 35 per cent. A further benefit for TFFs, together with the investment permits granted by the Fiji Trade and Investment Board and tax-free status, was the entitlement to import ‘specialist labour’ without passing the stringent tests of importing labour from other countries as provided for under the immigration laws (Narayan and Prasad 2003: 13).

Early growth was spectacular, with garment factories accounting for 78 of the 114 implemented TFF projects and 83.4 per cent of TFF employment between 1987 and 1990. Garment employment more than tripled from 3,000 to 10,000 in just four years (between 1988 and 1992) (Reserve Bank of Fiji 1993: 28). New Zealand (16 factories) was the leading source of early foreign ownership, followed by Australia (13) and Singapore (three) (TFF Sector Report n.d.: 2). The scheme came to be dominated by the burgeoning garment sector. In the period 1988–98, 57 per cent of all TFF investment was in the garment sector (Narayan 2001: 37) and garment employment became the dominant source of manufacturing jobs.

* provisional

Source: Data from Fiji Bureau of Statistics (various issues).

It was Australia, however, that came to dominate the industry. Export growth to Australia was spectacular through the 1990s as it moved from a quota to a tariff system and in 1991 Australia implemented the ICS, which gave incentives for Australian companies to source raw materials from Asia, add value in Australia and then export to Fiji for offshore processing where a finished product could re-enter Australia under SPARTECA. Under the scheme, Australian companies could claim a ‘duty drawback’ on imported Asian fabrics. Coupled with SPARTECA, the ICS offered further opportunity for the Australian garment industry to strengthen ties with the Fijian garment sector. Consequently, by the late 1990s, Fiji became a key supplier for major Australian brands such as Rip Curl, Country Road, Lee Jeans, Just Jeans, Hot Tuna, Voodoo Dolls and Wet Wet Wet. Indeed, the Fijian garment industry continues to be quite embedded in the production of recognisable global and regional brands. For example, brands identified through research in 2003 in Suva included Nike, Yakka, Target, Country Road, Adidas, David Jones, Lee Jeans, SirNormies and Ada.

Foreign ownership, particularly Australasian, has remained pronounced. In the late 1990s Cawthorne (2000) estimated that two-thirds of factories were foreign-owned, including 37 under Australian and New Zealand ownership. Nevertheless, one of the lesser-appreciated aspects of this growth was the number of Fijian-owned factories that were established (Gaunder 1990: 19). Certainly, local entrepreneurs saw great opportunity in the garment industry. They also played a key role in the early growth years of the 1990s and continue to be important today.